Jan. 17 (Bloomberg) -- The number of Americans filing
first-time claims for unemployment insurance payments fell more
than forecast last week to the lowest level in five years,
pointing to further improvement in the labor market.

Applications for jobless benefits decreased by 37,000 to
335,000 in the week ended Jan. 12, the lowest level since the
period ended Jan. 19, 2008, Labor Department figures showed
today. Economists forecast 369,000 claims, according to the
median estimate in a Bloomberg survey. A spokesman for the
agency said the drop may reflect the difficulty the government
has in adjusting the data after the holidays when seasonal
workers are let go.

Fewer claims indicate businesses have grown comfortable
with their current headcounts, a necessary development before
hiring starts to pick up. At the same time, higher payroll taxes
that shrink paychecks may prompt companies to hold the line on
expanding headcount should Americans cut back on discretionary
spending.

“The labor market is certainly getting better,” said
Brian Jones, senior U.S. economist at Societe Generale in New
York, who projected 345,000 claims. Even with the seasonal
adjustment issues, “this is still a good report. Chances are
claims remain at a fairly low level.”

Another report today showed housing starts climbed 12.1
percent in December to a 954,000 annual rate, capping the best
year for the industry since 2008. For all of 2012, builders
began work on 780,000 homes, up from 608,800 a year earlier,
Commerce Department figures showed.

Stock Prices

Stocks rose after the reports, with the Standard & Poor’s
500 Index climbing 0.2 percent to 1,476.19 at 9:52 a.m. in New
York.

Estimates for first-time claims ranged from 340,000 to
385,000 in the Bloomberg survey of 50 economists after an
initially reported 371,000 in the prior week.

Jobless claims figures can be volatile week to week, said
the Labor Department official, who can’t be identified according
to rules of the government’s data dissemination. In the first
couple weeks of January, unadjusted claims typically rise to the
highest level of the year, he said. The increase this week was
smaller than the agency anticipated in adjusting the data.
Similar patterns occurred in January 2007 and 2008.

The four-week moving average of claims, a less-volatile
measure, dropped to 359,250 from 366,000.

Continuing Claims

The number of people continuing to collect jobless benefits
rose by 87,000 to 3.21 million in the week ended Jan. 5. The
continuing claims figure does not include the number of workers
receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now
collecting emergency and extended payments increased by about
68,000 to 2.06 million in the week ended Dec. 29.

The unemployment rate among people eligible for benefits
rose to 2.5 percent in the week ended Jan. 5 from 2.4 percent.
Twenty-nine states and territories reported an increase in
claims, while 24 reported a decrease.

Employment Gains

Job creation held steady in December, with the 155,000
workers added to payrolls in line with the year’s average
monthly growth rate of 153,000 jobs, Labor Department data show.
That progress brought unemployment to 7.8 percent at the end of
2013, down from 8.3 percent at the start of the year.

A hurdle for the labor market may come from a higher
payroll tax that damps consumers’ spending power. As part of its
budget agreement on Jan. 1, Congress agreed to let the tax, used
to pay for Social Security benefits, return to its 2010 level of
6.2 percent from 4.2 percent. That reduces the paycheck by about
$83 a month for someone who earns $50,000.

Contributing to the ranks of the unemployed, American
Express Co. said Jan. 11 it will eliminate 5,400 jobs this year.
Morgan Stanley, the sixth-largest U.S. bank by assets, plans to
eliminate about 1,600 jobs from its investment bank and support
staff in upcoming weeks, about half of which are located in the
U.S., Bloomberg News reported on Jan. 9.